Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/179147 
Year of Publication: 
2017
Citation: 
[Journal:] Games [ISSN:] 2073-4336 [Volume:] 8 [Issue:] 3 [Publisher:] MDPI [Place:] Basel [Year:] 2017 [Pages:] 1-24
Publisher: 
MDPI, Basel
Abstract: 
This paper studies incentives provision when agents are characterized either by homo moralis preferences, i.e., their utility is represented by a convex combination of selfish preferences and Kantian morality, or by altruism. In a moral hazard in a team setting with two agents whose efforts affect output stochastically, I demonstrate that the power of extrinsic incentives decreases with the degrees of morality and altruism displayed by the agents, thus leading to increased profits for the principal. I also show that a team of moral agents will only be preferred if the production technology exhibits decreasing returns to efforts; the probability of a high realization of output conditional on both agents exerting effort is sufficiently high; and either the outside option for the agents is zero or the degree of morality is sufficiently low.
Subjects: 
moral hazard in teams
optimal contracts
homo moralis preferences
altruism
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article
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